Stock-market volatility has been relatively low so far in 2023, but may rise in the second half. They expect the median stock in their basket to nearly triple the median S&P 500 name.But a few things stood out about the rally. It wasn't a broad swath of stocks that drove the uptrend: a handful of mega technology names pulled the entire index up as they gained.
Moving forward, that low-volatility environment may change, and it would help stocks with the highest prospective risk-adjusted returns outperform the S&P 500, said David Kostin, the chief US equity strategist at Goldman Sachs, in a recent note. , a metric that helps investors gauge whether the risk they've taken in an investment has paid off in returns, compared to what they would have earned in a zero-risk alternative like Treasuries.
The forward-looking list, which adds 39 stocks, doesn't include the typically growth-oriented, mega-tech names that have carried the market in 2023. Yet, Kostin and his team expect the median stock in their basket to outperform the median S&P 500 member by nearly three times, or gains of 32% versus 11%, in the next 12 months without a significant increase in volatility.